US factory activity unexpectedly grew in March for the first time since September 2022, thanks to a strong rebound in production and stronger demand, while input costs rose.
The Institute for Supply Management's manufacturing indicator rose 2.5 points to 50.3 last month, according to data published on Monday. Although it barely exceeded the level of 50 that separates expansion from contraction, it put an end to 16 consecutive months of contraction in activity.
The March index beat all estimates in a Bloomberg survey of economists. Production experienced a sharp rebound compared to the previous month, with an increase of 6.2 points, the largest since mid-2020. At 54.6 points, production growth was the highest since June 2022.
The group's new orders measure also returned to expansion territory after contracting in February. The factory employment indicator contracted less in March than the previous month.
“Demand remains in the early stages of recovery, with clear signs of improving conditions. Production execution has increased compared to January and February as the panelists' companies return to expansion,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
Nine industries recorded growth in March, led by textile factories, non-metallic minerals, paper products and oil. Six contracted, including furniture, plastics and rubber products, and electrical equipment.
More optimism
The country's purchasing and supply managers have recently expressed optimism about the outlook for the manufacturing sector. Improving order growth illustrates resilience in consumer demand and business investmentand suggests that companies have made progress in matching inventory levels to sales.
ISM data showed factory inventories shrank at a slower pace last month than in February, while a measure of customer inventories shrank at a faster pace.
At the same time, the cost of materials and other inputs is rising, suggesting persistent inflationary pressures. The group's prices paid indicator rose 3.3 points to 55.8, the highest level since July 2022.
Meanwhile, foreign customer orders, backorders and imports remained unchanged in March.
